4 Tips to Picking the Right Cloud Partner

12 January 2016 by Allan King

In the old days, if we wanted a good server we went to HP. We knew if we needed storage we went to EMC and for routers and switches we went to Cisco. Now it is really hard for customers and channel partners alike to understand exactly which vendor to partner with for what service. All the big players have become exactly alike. Whether I go to HP, IBM, EMC or Oracle they all have the exact same marketing message. “Cloud, big data, social, mobility.” How is a customer or a partner expected to pull that apart and know where to go?

Here are four tips to keep in mind when choosing your cloud partners.

1. Hardware is a HARD Game

As Woodrow Wilson said, “If you want to make enemies, try to change something.” It is so true, whether that be internally with your own team or with partners. The stalwart attitude is, “Why do I need to change?”

Vendors are now very emotional about everything. By goodness, you better be on their bandwagon because if you consider anything else you’re in trouble. You make changes to your business model and your vendors are down your throat going, “Why are you changing?” Because it’s about survival, it’s about options, it’s about choice. Yet if we follow choice we make change, and that seems to inflame every conversation. It is a daunting time to be in this industry and try to navigate your way through it.

The cloud computing market is booming, and it is reshuffling the ranks of vendors. This year (2015) it is predicted to be a US$95 billion industry. The biggest threat to a lot of the traditional infrastructure providers and systems integrators is not infrastructure-as-a-service, it’s the transition to software as a service (SaaS0. Online applications will make up 80 percent of that US$95 billion.

Everybody’s trying to reinvent themselves. If I’ve learned one thing over the last two years, if you are a hardware company, it’s very, very difficult to reinvent yourself.

I think Microsoft is a quintessential example of how software allows you to win quickly. We’re seeing Microsoft pivot almost, you would say, on a dime. We’re seeing their ability to innovate in the cloud almost on a weekly basis. Hardware companies that generally follow a five-year development life cycle are challenged by that. Even though they may say “We’re a software company”, it’s bound to hardware and that is a much slower process.

For many, including vendors and system integrators, they are banking on the traditional four-year life cycle to come around: asset replacement, project uplift. But when they get to the next cycle, I believe up to 50 percent of what we used to protect and manage will have been evacuated into the cloud as SaaS or simple IaaS services.

#Tip: Partners who are too focused on hardware are facing a tough slog. Does their walk match their talk? How are they helping you build out a model centered on Choice and Agility?

2. Picking out the Hype from Hyperscale

In the early 1990’s I started an ISP with a couple of friends freshly out of university. Our ISP was formed after the student union of our old university approached us as ex-students and said, “If you create an ISP all our union members will go on this internet service.” This was before Microsoft had even launched a browser, it was one of the first ISPs.

Then the big boys in Telstra, iiNet and other national telcos came to market with their massive marketing and infrastructure budgets. They were able to quickly capture market share, which due to high customer support expectations was the only way to make money. We watched as our own client diminished as we couldn’t compete at scale. We are paying Telstra 70c on the dollar just for our communication links. A company our size just couldn’t compete. I learned a valuable lesson from that experience. Scale matters. It’s as true now for hyperscale cloud providers as it was for ISPs in the 90s.

At Buttonwood, we analysed and compared services from hyperscale and managed cloud providers. We theorized that the cloud market would go through the same consolidation and rationalization process. At the hyperscale level, we believed in a four horseman strategy; AWS obviously, Microsoft with Azure, which was moving quickly, and Google, a laggard in cloud services but one operating at massive scale. However, the fourth horseman was an interesting debate. Would Rackspace survive or would IBM or VMware find its mojo and emerge as a dominate cloud player. Regardless of the final hyperscale count, we realised that building a commodity cloud service was too expensive and too risky. We just didn’t have the scale. To prosper in the new cloud economy, we needed to be able to deliver above the line value, leveraging commodity services from the hyperscale providers to deliver a solution that helped solve the complexity of cloud and ensured no vendor lock-in and delivered operational consistency.

Fast forward to today and you can see much of what we predicted occurring in market. The only change to the equation has been what I call the “Snowden Effect”. When the world learnt about NSA’s PRISM, a clandestine surveillance program that collects internet communications from major US internet companies, the need for sovereign based Managed cloud providers emerged.

However, for many small to medium sized cloud providers the Snowden Effect may have come too late. Having run a build-it-and-they-will-come strategy, the upgrade cycle is again upon them. They now need to ask the question, “Do I invest again in a capital intensive strategy, or do I pivot or perhaps just shut up shop?” We have seen many providers of late take the later approach. VMware was a big winner in the early days when most new small to medium cloud providers were initially founded on their vCloud stack. This premium pricing strategy, when compared to OpenStack, must be pressuring margins. If providers do decide to invest again, I would wager many will take an open source approach (OpenStack) or perhaps look to Microsoft to help shore up their balance sheets and look for great returns.

But a warning! With Microsoft slated to invest US$10B on their cloud strategy this year alone, and with similar combined investments coming from AWS and Google, the race-to-the-floor cloud market is not for the faint of heart.

#Tip: When you need raw resources for your own projects it’s tough to look past the three majors, or the few ‘at scale’ Managed providers such as Dimension Data, Telstra, IBM and maybe, just maybe Virtustream.

3. Find a Partner Who Cares About Your Outcomes

Cloud has changed expectations more than the technology. It’s an interesting conversation and one we’ve had a lot at Buttonwood. You hear statistics that say 70 percent of all IT projects fail to deliver the required outcome. They don’t fail as projects but they fail the ultimate goal. You can imagine that, from the perspective of sunk costs, management and boards are saying, “Enough”.

In contrast cloud is perceived as simple, agile and efficient. Boards say, “If cloud can get a result in that amount of time, why is it taking us so long to do it ourselves?” When customers ask me that exact question, I say, “If you only want one service with one SLA we can deliver that.” When you assess workload by workload you find some are cloud candidates are some are not. Each workload needs to be assessed carefully to understand Trust, Economic and Functional objectives. For example, a critical application with a 6×9’s availability requirement can’t be lifted and shifted to a hyperscale provider who openly and honestly publish a 99.5 SLA. For these workloads, an on-premise hybrid approach is probably best.

Yet cloud has changed the game. From conversations with CIOs and industry it’s clear we have moved on from the days of vendor buyers. It’s no longer, “I’m an Oracle database guy”. The customer has elevated the conversation. I don’t know whether this is through necessity or a transition to business thinking where people are saying, “I want an outcome”.

Cloud providers initially had a very direct-sales mindset. They didn’t see value in the channel and wanted to disintermediate the industry by selling to organisations themselves. It turns out they didn’t have the enterprise expertise to pick the value proposition and to sell it. They couldn’t sell the outcome. Now we’re seeing the pendulum swing back. System integrators and other channel partners are taking the big cloud picture and distilling it down to an outcome. It’s an outcome that’s almost agnostic but it must be delivered, managed and integrated by the customer or channel itself.

#Tip: When you want a managed service look for partners who can talk business outcomes. They should get you better results than vendors selling a thousand products/services.

4. Don’t Back a Losing Horse

I think there’s going to be a big shakeout in the number of small cloud providers. We’ve already gone through one cycle in the past three or four years. The second cycle, which we’re in now, will take out a lot more of the smaller providers, either through closure or acquisition.

I sat on a roundtable about four years ago with everyone from a telco to small and mid-tier players. There were 12 at the table and 11 of them had a cloud offering. The overriding consensus was that if you hadn’t built your cloud offering now you were finished in market.

I kept quiet because I didn’t believe that any of us at the table had the ability to build to scale to be relevant long term. Looking back four years the build-it-and-they-will-come model hasn’t worked. A lot of those platforms have lain dormant, partners who didn’t have the balance sheets have cannibalised their project-related business to feed this very expensive asset they built in the back end. They have had to compete against themselves and driven down their own value proposition and margins.

Without naming names, I think a lot of the smaller providers – the local SIs, the regionalised SIs that don’t have the scale of a Telstra – are not going to survive. They’ll just get crushed by volume, by scale, by marketing, by investment.

Tier two players such as Rackspace, Telstra, Dimension Data, and IBM – they’re running global business to help fund the transition to cloud. So we’ll have a two tiered cloud market, and that’ll be it. In Australia I think it’ll distill down to probably a dozen, if that!

#Tip: Small cloud providers can provide you higher levels across a narrow band of service offerings. Just double check they will be open tomorrow.

Picking the Right Cloud Partner

This is the industry of strange bedfellows. Companies that used to be competitors are now partners. Those that were partners are no longer partners, they’re competitors, and we’re seeing the best of breed approach.

Customers want desktop as a service, communications as a service and DR as a service. They’re the value propositions above the line that we talk about. They’re the outcomes that customers are looking for.

Choose your partners carefully because not all can deliver. Not all of them will survive.

Post by Allan King

Allan King is the Founder and Managing Director of Buttonwood, an Australian startup that wants to transform the way enterprises build and secure hybrid cloud services without unnecessary cost or complexity.